Wedmark

Corporation's Cupertino, California, plant manufactures chips used in personal computers. Its practical capacity is

4,500

chips per week, and fixed costs are

$71,000

per week. The selling price is

$500

per chip. Production this quarter is

4,300

chips per week. At this level of production, variable costs are

$1,978,000

per week.

Requirements

(a)	What will the plant's profit per week be if it operates at practical capacity?
(b)	Suppose that a new customer offers $460 per chip for an order of 100 chips per week for delivery beginning this quarter. If this order is accepted, production will increase from 4,300 chips at present to 4,400 chips per week. What is the estimated change in the company's profit if it accepts the order?
(c)	Suppose that the new customer in part b offered $460 per chip for an order of 700 chips per week and that Wedmark cannot schedule overtime production. Consequently, it would have to give up some of its current sales to fill the new order for 700 chips per week. What is the estimated change in Wedmark's profit if it accepts this order for 700 chips per week?

Question content area bottom

Part 1

Requirement (a) What will the plant's profit per week be if it operates at practical capacity?

Select the items that are relevant, then calculate the profit at practical capacity. (Only complete the necessary answer boxes. Use parentheses or a minus sign for a net loss.)

Profit at practical capacity

Part 2

Requirement (b) Suppose that a new customer offers

$460

per chip for an order of

100

chips per week for delivery beginning this quarter. If this order is accepted, production will increase from

4,300

chips at present to

4,400

chips per week. What is the estimated change in the company's profit if it accepts the order?

Select the items that are relevant if the order is accepted, then calculate the effect on profit. (Only complete the necessary answer boxes. Use parentheses or a minus sign for a net decrease in profit.)

	in profit

Part 3

Requirement (c) Suppose that the new customer in part b offered

$460

per chip for an order of

700

chips per week and that

Wedmark

cannot schedule overtime production. Consequently, it would have to give up some of its current sales to fill the new order for

700

chips per week. What is the estimated change in

Wedmark's

profit if it accepts this order for

700

chips per week?

Select the items that are relevant if the order is accepted, then calculate the effect on profit. (Only complete the necessary answer boxes. Use parentheses or a minus sign for a net decrease in profit.)

	in profit